Category: Real Estate

This blog hasn’t been up for very long, but if you have read even a couple articles you should be able to tell how much I love the city of Athens, UGA, and especially Georgia Football. While this blog is officially dedicated to Athens real estate, it is already apparent that Georgia athletics will always be a major topic for many posts. For me, it is impossible to live or work in Athens and not care about the university and its future. Here in Athens, we are so fortunate to have this great university right in the heart of our town. Small college towns are often unique and vibrant communities throughout the entire country. I am of course somewhat bias, but I don’t think there are any better than Athens, GA. The university brings so much to our town it is hard to really quantify. It impacts our entire economy, and therefore it also impacts our real estate and its value. With that in mind, I thought it would be a good idea to explore and discuss some of the ways UGA impacts Athens real estate.

First of all, the university brings stability to our local economy. UGA has an enrollment of around 35,000 students. That doesn’t include all the staff, and professors employed by the university which makes it an incredible employer and engine to the area. The university isn’t exactly the kind of employer that is going to pack up and leave either. If the University of Georgia goes out of business we will likely have bigger problems in the world than a lack of jobs. So it brings people and jobs, but how does that effect Athens real estate. Well obviously, it has a positive impact. There are so many ways that UGA influences the real estate market that it is hard to cover entirely. Maybe the best approach is to discuss UGA’s impact on residential, investment, and commercial real estate throughout the area.

Residential property is generally any property where people reside. This could include your house, a condo, or an apartment complex. But for the purposes of this discussion we will classify residential property as a house in a residential neighborhood. In previous posts, I have discussed residential markets in Normaltown and 5 Points. Both areas of town are seeing a good bit of renovation and growth in value. The driving factor behind this is location, and what makes their location desirable is their proximity to the university. On the other side of Athens, the university has a similar impact on the east side of town. As I mentioned earlier, the east side provides buyers with a different type of value. Basically, more bang for your buck. In addition, the east side is now home to the Veterinary Medical Center which is yet another example of the university impacting the area. UGA is the heartbeat of Athens. So many things center on it like employment, education, and entertainment. It is only natural that people would want to reside in close proximity. This creates a demand which in turn can increase property value. Nevertheless, residential neighborhoods that are located a little further out benefit as well. Just look to the growth in Oconee. The Watkinsville area has become a very desirable place to live thanks to the new homes and good schools. Many of the people that purchase homes in Oconee either work for UGA or have businesses that benefit from the school. So whatever the value of your home is today just be glad it is in proximity to UGA because if not it would likely be worth less.

In many cases, commercial and investment property can be thrown into the same category. Commercial real estate involves properties that are used for business purposes like retail stores, restaurants, or office space. Almost every business owner in the area has to have a commercial space to operate their business. For example, Athens is blessed with a unique downtown filled with bars, shops, and restaurants. Downtown Athens is located right next to UGA’s north campus which is a major reason the downtown area does so well. Every restaurant downtown depends on students, professors, and parents to make money. Every retail space downtown needs students to shop in their store. Every bar owner needs students to hang out in their bar to be successful. If you think about it, without UGA downtown Athens would likely have a lot of vacant space. In fact, how do think local retailers feel about Georgia football? If they are smart they want Georgia football to succeed. The better UGA does in sports the more people come to visit. Consider a restaurant owner or bar owner during the football season. They need that business to thrive, and without Georgia football many local businesses may not be here. But downtown is just one example of UGA’s impact on commercial real estate. Go a little further out, and look at the Alps road area or the development around College Station. Those are more examples of thriving commercial locations thanks to UGA. So remember the next time you are eating in your favorite restaurant that it is probably still in business thanks to the university.

While most commercial properties are often investment properties, many residential properties are used for investment as well. When it comes to rental or investment property the correlation with UGA is fairly evident. The student population provides a huge rental market in the area, and many people purchase residential properties to rent as an investment. This market can be a little tricky from time to time because rental properties and their income are more sensitive to outside factors. For instance, a property’s income will change over the years based on its age and the overall supply of housing. In the end, the same old rule applies. The better the location the more likely a property will have a higher return and higher value.

Here at 5 Market we are no different. We work with residential, commercial, and investment properties that all benefit from UGA. Truthfully, this information should be fairly evident to most people. But sometimes we all need a reminder of how lucky we are here in Athens. So be thankful to UGA, and be excited a new coach is coming. Because even Georgia football is important to our real estate.

Here in Athens, real estate seems to be doing very well. Another area that is currently thriving is construction. Builders are back building new homes, and contractors are booked up for months. It seems that there are renovations going on all over town, and it is definitely a good time to be a contractor. As we all know, supply and demand are tied together. Therefore, if the demand for contractors is higher than you should probably expect the cost to be higher as well. Conversely, if you look back to 2010 the cost was lower due to the lack of demand. As I mentioned before, the 5 Points and Normaltown areas are seeing a lot of renovations and remodels. Depending on your taste, you may or may not like the trend. But trust me when I tell you that it is a good thing for our community. When people invest in their home it is a sign of confidence in the market. It also a good sign when builders invest in properties. However, the one thing to watch out for is supply. You never want to see the supply greatly exceed the demand. All that aside, many homeowners are taking advantage of the low interest rates and investing in their homes. This is great to see, but it is an area that many homeowners need advice because they often make mistakes.

Property Brothers on HGTV

Thanks to the wonders of HGTV, many of us watch remodeling shows all the time. The problem with these TV shows is that they are just that…TV shows. For instance, Bill Cosby made raising kids seem fairly easy and often humorous. Well it is often funny, but it may be one of the hardiest things a person will do in their life. TV shows are not always based in reality. This is especially true with so called “Reality TV Shows”. If you pay attention to the credits in some reality shows they give credit to “writers”. How in the world can a “Reality TV Show” have a writer? My point is that these shows are fun and entertaining. They are good for giving us ideas, but keep in mind that what works in California may not work here in Georgia. Too often homeowners get excited and spend money in the wrong areas. So where should homeowners spend money in their house? In my opinion, homeowners should focus on three main areas when upgrading or investing in their property.

Maintenance

Livable Space

Up Dates

First, you must spend money on maintenance. This is commonly overlooked by a majority of property owners. You absolutely have to maintain your property. Maintenance comes first no matter what. It makes no sense to put in cultured marble if you have rotten windows. The issue here is that most people don’t see the deferred maintenance. But they can easily see a new bathroom. If you do not maintain and upkeep your property it will definitely cost you money in the long run. The next area that owners should focus their money is in the main living area or even adding more livable space. Everybody seems to focus on bathrooms and the owner’s suite. And these can be good areas to put money if you have it to spend. But be warned that you may not get it back. You need to be careful with how much you spend in areas like a master bedroom or bathroom. In some cases, it is smart to upgrade them or make them larger but you can overdo it quickly. You need to understand that people don’t live in their bathroom or bedroom. They sleep and shower there, but they live in the rest of the house. Buyers want large and functional kitchens with open living space. Any outdoor living space is always a huge plus as well. Storage can be a big plus, and if you want to expand a master it would be wise to make sure the closets are spacious. Lastly, it is important to keep your house up to date or least keep it from becoming too dated. Some older houses have fantastic space, but they have not been touched in 30 + years. Therefore, they eventually sell at lower price because the entire house needs updating. Which creates a good opportunity for a buyer to purchase the property low. I am not suggesting that you remodel your kitchen and redecorate every 5 years. However, if you are in your property for 15 years you may need to update a few things.

In closing, you will need to spend money on your home no matter what. At the bare minimum, you need to maintain the property. But if you take it a step further and renovate. Be sure to do it wisely. In the end, your home belongs to you, and you can decorate or upgrade it any way that you see fit. But if you ever plan to sell it would be smart to consider future buyers.

As I have mentioned before, Athens is a very unique town for many reasons. It is a small city but it has a lot to offer. There are great restaurants, good shopping, great music, and of course there are numerous events in town throughout the year. But in terms of real estate, Athens is unique because it provides so many options for buyers. Buyers can choose to purchase in one of several “in town” locations or they can opt for more space and land in one of the many outlying areas that are usually within 15 to 20 mins of downtown.

Normal Hardware On Prince Ave

Recently, I have discussed the 5 Points area and the East Side of town. Both of which are examples of different “in town” options for buyers. Another great option for buyers in Athens is Normaltown. Normaltown is one of the oldest areas of town, and it has a rich history. In fact, it was the first area of Athens wired for electricity in 1896 or so I am told (didn’t fact check this one). But in recent history it has seen a lot of positive growth in business and real estate. So today let’s take a look at the growth and real estate values in the Normaltown area.

First of all, to discuss the Normaltown area you need to define it geographically. Traditionally, the Normaltown area has been considered the area or neighborhood located in or around Athens Regional Medical Center on the South side of Prince Ave. Meanwhile, the nearby Boulevard area is located on the other side Prince either on or around “Boulevard”. If you have not visited Boulevard then I highly suggest you take the time to drive down the street. Many of Athens’ oldest homes are located in the area. So for the purposes of this blog, we will refer to Boulevard and Normaltown as one general area even though they can be defined separately.

I have talked about the importance of location numerous times already. But the Normaltown area serves as yet another example of where location raises value. The 5 Points area is centrally located, but one could easily argue that Normaltown is a superior location. For example, Normaltown is very close to downtown and in close proximity to a major hospital. With the recent opening of UGA’s Health Sciences Campus, it is right next to an area of UGA. Additionally, when you head west on Prince Ave you will arrive at I-85 in about 20 mins or so. Not to mention, that most of Normaltown is zoned for Chase Street Elementary which has become a very desirable school district. Lastly, the area has seen an increase in places to eat and gather for a drink. As a matter of fact, many Athenians now prefer to grab a drink in Normaltown and avoid the crowd downtown.

However, every area has its ups and downs so to speak. But much like 5 Points, the disadvantage of Normaltown could also be seen as an advantage. Due to the age of the area, many homes are older and not up to date. Nevertheless, this creates a lot of charm and character in the neighborhoods which many buyers are looking to find. Furthermore, both builders and home owners are updating the homes and floor plans which is similar to the current trend in 5 Points. Surprisingly, it may cost you a little less to purchase in Normaltown than it would in 5 Points. It really all depends on the property of course, but in general the price per square foot (PSF) in Normaltown is less than 5 Points. The most recent comps in Normaltown support a price up to $175 PSF for a newly renovated and well located property. This is a good deal lower than the current prices in 5 Points which can exceed $200 PSF. Nevertheless, you can find homes in the area with a much lower price tag. But if you find a good house to buy in Normaltown be sure to act fast. It is currently one of the most competitive areas in town.

We are definitely experiencing a strong market right now. This is true for many areas in and around Athens, but you should also understand that “trees do not grow to the sky”. This doesn’t mean that values will suddenly fall, but you cannot expect a property value to go up indefinitely. On the other hand, if you buy in a well located area that is desirable to many buyers your value should hold up better over time versus other locations. And Normaltown is a prime example of a well-located and highly desirable area.

Athens is a great community that is driven by our wonderful university. As I have mentioned before, the university brings many different people to Athens which helps create a unique population here in town. Even though Athens is geographically small there are many different areas one can choose to live. Each one of these areas has its own advantages that may or may not appeal to different people. But the east side of Athens is an area of town that is often undervalued and under appreciated. And that can provide buyers in Athens an opportunity. We all know that the real estate market is recovering. In some areas it has fully recovered and other areas aren’t quite there but are progressing. Here in Athens, you hear a lot about 5 Points, Normaltown, and Oconee County. And we just don’t hear as much about the east side, but that doesn’t mean it is without value. In fact, the east side offers a lot of value and may offer more as time goes on. I am not referring to value with regards to its worth or price. But value in terms of what you get for what you pay. So this week let’s take a look at the growth and value on the eastside of Athens.

University Heights Entrance

Athens’ east side of town is a fairly large area, but in general it begins once you cross the North Oconee River heading east. To the north, that begins on Oconee Street just past downtown, and to the south it begins where College Station road and The Loop intersect. The east side of town is primarily comprised of residential neighborhoods. For example, University Heights, Green Acres, Cedar Creek, and Falling Shoals just to name a few. However, the east side like most of Athens has plenty of student areas as well. The student housing areas are concentrated on Barnett Shoals between Lexington road and Gaines School, yet those are not the only student housing options. Nevertheless, the majority of east Athens is comprised of residential neighborhoods.

Vet School on College Station

You don’t have to be a real estate agent to know that real estate seems to be more affordable on the east side of town. Over the years, that has generally been the case and there are reasons for the difference in price. One main reason maybe that Atlanta is located to the west of Athens. It is only natural that Athens would see more growth towards Atlanta than Augusta over the last 40 or 50 years. When I was in school the eastside had a lot less to offer than it does now. First of all, there were less amenities and fewer places to eat, but now the east side has two great grocery stores, several restaurants, and even a few places to grab a drink. These are all good things, but the biggest thing to happen on the east side of town has come very recently. And that is the opening of UGA’s new Veterinary Medical Center. Better amenities and the new vet school serve as two good examples of where the east side can offer convenience and good location. But what are the real estate costs?

In other areas of town, buyers often have to pay well over $250,000 just to get a house in need of work with no upgrades. On the eastside of town, buyers can pay much less and receive more. Falling Shoals serves as a good example of an east side value. Falling Shoals is a swim/tennis neighborhood with great amenities located about 10 mins from UGA.

Falling Shoals Tennis Court

That is much closer than many west side locations and Oconee neighborhoods. But the price tag is much lower. In Falling Shoals, resale homes with over 2,000 sq. ft. sell around $230k, and there are still a few new homes available that can be purchased around $250k. The price per square foot makes Falling Shoals a real value for many home buyers and families. A similar value is offered in some of the older neighborhoods as well. For instance, Green Acres and Cedar Creek are located closer in and still offer a good value per square foot. In Green Acres, a large house on a basement would probably sell close to $170,000. Meanwhile, a smaller brick house with no upgrades might be purchased below $130,000. At today’s interest rates, these prices make home ownership available to many more buyers. In my opinion, there may be real opportunity in other areas as well.

Vet School on College Station

As I mentioned before, UGA recently opened its new Veterinary Medical Center on the corner of Barnett Shoals and College Station. This is a good thing for the whole area and UGA. But its impact on the east side could be fantastic. Essentially, the university now extends to the end of College Station road making all of the east side more convenient for vet students and professors. More importantly, University Heights is now situated between the vet school and UGA’s main campus. In case you didn’t know, University Heights is the neighborhood located off of College Station road between Research Drive and the vet school. I don’t have a crystal ball, but the vet school could increase prices in University Heights over time. The homes are older and many are rentals. But the location is close to campus, 5 points, and not far from downtown. And of course, it is right next to the vet school. Given that prices in University Heights range from $100k to $150k it provides more value and opportunity than many other areas in Athens. Granted, most east side homes will likely never have a price tag as high as some other locations. But that doesn’t mean it is a bad investment. In the end, it may offer the most bang for your buck in all of Athens.

The last 5 years have been a little crazy for real estate all over the country. And Athens, GA serves a prime example of what was good and what was bad. I am sure you can remember what it was like 5 years ago. Our economy was in full recession which was created by the mortgage crisis, and the real estate industry was suffering. We experienced a record amount of foreclosures along with a sharp drop in real estate values across the country. I think it was late 2010 or early 2011 that we finally saw the bottom. After that the only direction to go was up and boy have things gone up. Here in Athens, we have seen many areas of the market make a full recovery. Granted, not every area of town is all the way back but the recovery is evident. So what areas have recovered the most? If you go by the numbers the strongest real estate values are in three primary areas: 5 Points, Normaltown, and Oconee County. Oconee is a large county and not every location is strong but in general the area is doing very well. I plan to discuss the values and current trends for each area or market in Athens over several blog posts. But since our office is located in 5 Points it makes sense to start there.

5 Points is the general area that runs from UGA’s south campus and ends around Baxter street and the Alps road area. It is an older area of town and is considered to be a very central location. Subsequently, it has always been a desirable part of town. You would have to go back a long ways to say otherwise. In 2010, 5 Points values were much lower than today. Nevertheless, when compared with other areas of town it was still one of the strongest. But lately there has been a huge comeback and increase in values. This is of course due to the location and traditional look of the area. During the recession, values were topping out around $150 PSF, but when the recovery began 5 points was positioned to boom. Have you ever heard to buy low and sell high? Well 5 Points real estate serves as a great example, and many home buyers were able to take advantage of a depressed market from 2009 to 2012. As of today, some values in 5 Points are over $200 PSF. For instance, if a house is fully renovated or up to date it may easily achieve a value of $200 PSF or greater. On the other hand, if a house is small or drastically out of date the value can be much less. With respect to residential lots, the dirt in 5 points is worth more than any other dirt in town. So what caused this value or boom?

Well there are many reasons. First of all, 5 Points is right next to UGA, and the university is a desirable area of town where many people work. Convenience could be considered another driving factor. Over the last several years, we have seen more and more people want to live closer in to town. Nowadays more people want to walk or bike to places and 5 Points can provide that option. In general, the overall driving force behind 5 Points is location which should be no surprise. But every area has at least one drawback. In 5 points, the drawback could be seen as the age or size of the homes. Many people love older homes and their charm so to speak. I am definitely one of those people. I enjoy the unique characteristics of older homes and neighborhoods. I enjoy the feel of a home that has been lived in or has a history. Unfortunately, many older homes do not have much space. Many of us have grown accustomed to large kitchens and open floor plans along with expansive closet space. But older homes were just not designed in this manner and this can obviously be a drawback to many buyers. Nevertheless, people are working hard to make houses up to date in 5 points.

You are probably aware that numerous renovations have taken place in 5 Points and more are underway. Depending on your taste, you may or may not like this new trend. In my opinion, some renovations look fantastic and others could have been done better. I don’t want to get into a discussion about which renovations are good and which are not. But the fact is that every home needs to be kept up or renovated from time to time. Overall, this is a good thing for the 5 Points area. It also proves the rule that people will sacrifice and work to be in a good location. In summation, the 5 Points area has proven to be a desirable area in good times and bad. It remains a great location to purchase a home or invest in real estate and should be for years to come.

Previously, I posted a blog that addressed investment real estate for beginners. In general, I wanted to outline some key things to consider when purchasing real estate as an investment. Now I would I like to delve a little more into determining a value for investment property. Value and price are obviously important components of buying an investment property, and there are many tools that people can use to find a value. In general, I do not adhere to one set rule for finding value. I have found that each property is different and there are numerous factors you need to consider. But many investors use certain methods to evaluate properties. For instance, gross rent multipliers, internal rate of return, and cap rates. All three are useful ways to compare and value investments. But the most commonly used is probably the “cap rate” or “capitalization rate”. You may or may not have heard people use this term. It can be confusing and misleading to buyers or new investors. I am not a text book writer, but I will try to explain or clarify the term and its use in real estate.

Generally, speaking the capitalization rate is a valuation used to compare real estate investments. A cap rate seeks to find a ratio in the relationship between a property’s income and its purchase price or value. To find the cap rate, you need to determine a property’s “net operating income” or NOI. Net operating income is all the income for a property minus the operating costs. For the purposes of a rental property, the operating costs include: property taxes, insurance, hoa costs, management fees, and other maintenance. When calculating NOI they DO NOT INCLUDE: debt, depreciation, income tax, and improvements. For example, if a property makes $18,000 a year after property taxes, insurance, etc. than the Net Operating Income (NOI) is $18,000. Please remember this DOES NOT INCLUDE a mortgage payment. Once you know the NOI you can find a cap rate. Below is a simple formula used to calculate a cap rate:

Net Operating Income(yearly) / Price = Cap Rate

Conversely

Cap Rate X Price = Net Operating Income

It is a fairly simple formula. But you may have noticed something about this formula. Where do you get a number for price? Without price you cannot determine a cap rate. So essentially, you can make a cap rate whatever you want. One could simply make the price as high or as low as they want. What you need to understand is that the “cap rate” is just a way to express the relationship between the price and income. It is not ideal for finding value but better used to compare properties. Sellers offer investments at a price with a cap rate in mind but the real price is not determined until it is sold. In general, a higher cap rate means a lower value, but that could be a sign of a good buy depending on the market. You need to remember that cap rates are specific to the area. If cap rates are 7% in your area, and you find something at 9% than you may have found a good deal. But if cap rates are 11% in an area, and you find something at 9% than it may or may not be a good deal. Be sure to understand all the circumstances surrounding a property. This is another reason why it is helpful to find a professional to help you because knowing the local market is crucial when looking at cap rates.

I never like to talk over a client’s head, and cap rates seldom come up when I am working with someone to buy student rental property in Athens, GA. But it is a tool for many investors, and it never hurts any investor large or small to understand value methods. In the end, I am not a huge fan of cap rates. Expenses can vary year to year especially for large items and the interest rate on the mortgage is not considered. There are many types of investment properties. Hotels, warehouses, and commercial office buildings just to name a few. And cap rates are often be more applicable to these larger income properties. They can be useful, but it is not necessary for new investors to get too caught up with cap rates when buying individual rental properties.

You may or may not be aware, but a proposal to rezone a tract of land on Springdale was recently denied here in Athens. The property is located at 348 Springdale street(pictured) right in front of Stanton Way and adjacent to the end of Rocksprings. Currently, there are two existing houses and a tennis court on the site. The property was recently for sale and is now under contract with a builder/developer. In general, the rezone proposal was submitted to increase the density of the land. The property is currently zoned RS-15 which means it can be subdivided into 15,000 sq. ft. lots. That would currently yield around 6 houses or lots. The plan submitted wanted to achieve 14 townhome sites for an “age in place” style development. Basically, the builder was planning to develop the site into high end town homes targeted to a 50 + age group. In theory, it would be very similar to the “Villas at 5 Points” which are located where Westview meets Lumpkin. It sounds simple enough but rezones can sometimes be quite difficult.

The proposal was denied, but in my opinion the overall idea was sound and could fill a much needed void in the market. I do think that the proposed development was flawed and needed to be improved. But I do believe the location could be utilized for an “age in place” development if it was done wisely. In my job, I often talk with clients that would love to live close in to town with plenty of space and low maintenance. We have a huge population of people that are getting ready to retire. You may have heard of them. They are called “baby boomers”. That being said, Athens is now an ideal place for people to retire. We all know that Athens has a lot to offer young people and families. But when you think about it has a lot to offer someone over 60 as well. In some cases, people just want to come back to live in Athens because they went to school here and love our city. So what happened? Why wasn’t it approved?

Keep in mind these are just my opinions and you can agree or disagree. First, of all when someone wants to increase density in Athens people tend to get their guard up. Their guard goes up because increased density often brings the dreaded “college students”. I say this with some distain because I don’t understand why so many people in town dislike the students when our entire economy is based on them living here. In any case, this proposal was not targeted or designed to sell to UGA parents. Granted, sometimes you cannot keep a parent from buying a nice property in any location. But I feel confident the builder intended to market this project to older citizens. However, some folks in town do not agree. They felt it was a cover to build more student housing. I have to admit that student housing is not the ideal use for the neighborhood. Nevertheless, Towne Club, a wildly popular student community, is located on Springdale and has been for many years. In fact, there are many rental properties in the immediate area. Regardless, Springdale remains a great street and a desirable location to buy. On the other hand, there are some that just don’t think it would work because of the site’s location. I can understand some of those objections, but there just aren’t many sites like this left in the 5 Points area. The location is a block from Cloverhurst and down the street from Milledge and Baxter. In theory, any resident could walk to dinner or a football game.

As I stated earlier, I think the plan as proposed would need to be improved, but I was disappointed to see how vehemently it was ridiculed and denied. Many residents in the area dismissed it immediately and never gave it much of a look. For instance, many people on the “Friends of Five Points” list serve immediately rejected the idea. That being said, the builder did not hold an open forum to discuss or educate people in the area about the proposal. It may have been helpful if residents could have had an opportunity to hear or see the vision for the property. Every citizen of Athens is entitled to their opinion. And many of us have different ideas about what is good for our beloved town. I never want to discourage conversation, and this project is an example of poor communication and little conversation. It may have had a chance with a little more positive input and of course some changes.

Thanks to our fantastic university we have a very diverse population. It is one of the best things about our town. We have so many different people with different world views living in this small college town. I think Michael Stipe once said, “What makes Athens so great is that it is so very southern yet so very accepting of different people.” Maybe he never said that, but I was once told that he did and I liked it. If he didn’t say it than someone did. So we have a great town with all these great people living here. But we need to do a better job of communicating and discussing our growth and development. It seems one segment of the population is quick to dismiss a new development and another segment is a little too quick to embrace it. Maybe there is a happy medium. Athens has developed a reputation of not being “business friendly”. For example, remember the huge objection to the Walmart grocery store downtown? I am not sure all those people against Wal-Mart were wanting a large student housing development instead. It serves as an example to “be careful what you wish for.” Well this has turned into quite the rant. In closing, I just think that when someone wants to invest or develop in our community residents and builders both need to listen a little more and yell a little less.

Making an offer and negotiating a contract are crucial parts of the home buying process. This is not an area where you want to make a mistake. Which is why it is so important to have a good agent, and lender working with you before you make an offer. The process of making an offer is fairly easy thanks to uniform contracts. Here in the state of Georgia, almost all realtors utilize the Georgia Association of Realtors Contract. It changes a little from year to year but the core components stay the same. This is good because it helps create uniform practices throughout the state. Nevertheless, other areas of real estate do not always use uniform contracts. For example, a condo conversion or a commercial purchase often have special contracts that are unique to the agreement or property. But that is rarely the case with residential homes. Your agent will walk you through the contract when you are preparing an offer. Most things are fairly straightforward. Honestly, the current GAR contract is more of a buyer option than a contract because there are so many contingencies in favor of the buyer. Regardless, when I work with buyers in any transaction I want them to understand three things:

Negotiation tactics vary depending on the property and market conditions

An offer price needs to be realistic

Time frames are crucial and must be understood

When it comes to negotiating everyone claims to be an expert. I have worked in real estate for over 10 years, and I have seen all kinds of tactics. Many of us are naturally competitive, and that seems to come out in people when they negotiate for property. Someone wants to win. In reality, both sides should win. A seller wants to sell and a buyer wants buy. Depending on market conditions, a buyer may get a great deal and other times a seller may get one. But a good agent can make sure you buy or sell at a price that is either fair or a good deal. The property and market conditions should influence your offer price. For example, if the market is slow, and the house has been sitting there may be an opportunity to purchase well below asking price. Conversely, if the property is well located and highly desirable you need to bring a strong offer. The type of property influences negotiations as well. People become emotional about their home where as an investment or commercial property is mainly a business decision. There is no rule of thumb or secret to negotiation. It will depend on the situation, the market, and the circumstances around the property. Try to find a good deal, but also be prepared to pay a fair price for what you want. A good deal is always preferable, but there is nothing wrong with paying a fair price either. Sometimes there just aren’t many great deals available.

When it comes to price all the same rules apply. There is no set rule for the initial offer price. That being said, most of the time you don’t want to make your best offer in the beginning. But from time to time you will need too. The last thing you should do is go around making low ball offers to everyone. First of all, it wastes people’s time which is rude. And lastly, it often makes you look stupid instead of smart. Don’t get me wrong, you can make a low offer but do it within reason and when it makes it sense. Most importantly, understand that it is ok to pay fair market value. In the end, a good realtor will make sure you either get a fair price or a good deal.

Lastly, you need to understand the time frames of the contract and make sure they are realistic and reasonable. As a buyer, you will have a due diligence period and a financing contingency. A due diligence period should be two weeks at the most when buying in the Athens area. This is the time frame for you to get a licensed inspector into the property and your loan process underway. 14 days is more than enough time to get this accomplished for an existing home. New construction purchases can be a little different, but 14 days is plenty of time for an existing home purchase. The loan approval and appraisal can take a little bit longer. In most cases, 25 days is enough but this can be pushed back a little if necessary. The appraisal should be done within this timeframe. Ideally, the appraisal price is equal to or greater than the contract price. If not, you will have the option to leave the contract, reduce the price, or pay the difference. It should be noted that most appraisals are usually within a few thousand of the agreed price. Basically, don’t expect the appraisal to be $30,000 over your contract price. It can happen but it is rare.

In the end, this part of process is very subjective. The market conditions and circumstances around the property should always be considered when making an offer. For instance, when a property is in foreclosure you may be able to take advantage. But beware because many foreclosures are competitive, and you may need to offer list price or better to acquire the property. One of the biggest things you need to have with your realtor is trust. You may need to rely heavily on them when it comes to making an offer. So it is important to find someone that you can trust that is professional. There are bad people in every profession. Bad lawyers, bad doctors, bad chefs, and bad hair stylist. Real estate is no different so find a good person to help you.

Investing in real estate is an absolute must for any person or family. At the bare minimum, you need to own your home and not rent. There are too many advantages to owning real estate, and if you don’t take advantage it can hurt you in the long run. People invest in real estate for many reasons. Most buyers purchase real estate to build equity and appreciation in their personal home. Others take it a step further and buy real estate solely as an investment and not for any personal use. Real estate investment is often a good idea and a necessary part of a balanced portfolio, but new investors need education on real estate as an investment. For example, how does one determine a good price or fair value? There are many ways that investors determine a property’s investment value. For example, gross rent multipliers, cap rates, and the internal rate of return. These are all good barometers but require more explanation and may be a little advanced for “Investment 101”. For now, I only want to discuss the basics to consider when getting starting in real estate investment.

When most people think of an investment they generally think of the stock market, a 401k, or an IRA. All three can be good tools for investment, but what most people don’t realize is that real estate has been one of the best performing investments throughout history. To put it simply, it is a real asset and they aren’t making any more of it. Meanwhile, the population continues to grow and people continue to live longer. And all of those people need places to live and work. There are many areas where you can invest when it comes to real estate. For example, rental housing, commercial buildings, or land just to name a few. But one of the best areas to get started is residential rental properties. Athens, GA is a great college town with a major university. Therefore, residential and multi-family rentals represent a large part of the investment opportunities in the area. Having a large state university in Athens creates a strong rental market. Because of UGA, there is a steady supply of people that need short term housing which makes Athens an ideal place to purchase investment property. So what do you need to know when it comes to investing in rental properties? There are numerous factors to consider when investing, but the three most important are location, price, and time frame.

Everyone should understand that location is important in real estate, but it is especially true when purchasing investment property. The location of a property is directly correlated to its desirability and ultimately the rental income. If a property is well located it will have less vacancy and more resilient rates. For example, if you are buying a property to lease to college students make sure it is located in an area desirable to college students. Conversely, if you want to rent to families than you may want to find a property in a good school district. It is also important to understand that a well maintained property tends to attract better tenants than a poorly maintained one. The next thing to consider is the price. Price is important when it comes to buying anything, but an investor really needs to understand how the price of an investment property relates to cash flow. Investors use many methods to value investment property. An old rule of thumb is to take monthly rent and multiply it by 100 or 110 to determine a value. It is a very basic formula and doesn’t work every time. But it is a good place to start for a new investor. Basically, you need to make sure that the investment is not going to lose money. Be sure to take into account all the expenses along with the mortgage payment. Many times new investors forget about maintenance or other costs outside of property taxes and the mortgage. Lastly, you should have a plan or time frame in mind for the investment. For example, do you want to pay off the property? Do you want to hold and sell later, or take advantage of depreciation and cash flow for a number of years? There are numerous reasons people invest in real estate, but be sure you understand your goal and purpose of investing.

Yes, there are many factors to consider when investing in real estate, but it should not be viewed as a scary endeavor. It seems most people don’t invest because they worry about an unexpected cost or the maintenance of a property. This is somewhat understandable because maintenance can be a costly item from time to time. Nevertheless, if a property is well located, and purchased right with a time frame in mind the advantages will greatly out weigh any risks.

The most fun part of purchasing real estate is locating the property. Unfortunately, too many buyers jump the gun on this stage and start looking before they have an agent or an understanding of their financing. This is understandable because searching for a home or investment property can be a lot of fun. Nowadays, I do a lot of work with investment property and commercial real estate, but I continue to work with residential properties for many reasons. Generally, I just enjoy helping people buy a house, but it is also a lot of fun to look at properties. Most of the time this is a very enjoyable part of the process but there are times where it can become frustrating for home buyers. For example, here in Athens the market is strong and good properties do not last long. In some cases, they can be off the market within days and you can miss out on a property. If this happens more than once it can be very frustrating. There are a few ways to avoid this frustration but there are also times where frustration may be unavoidable.

First, it is important to be realistic when searching for a property. If you have a max budget of $300,000 then do not look at houses priced around $375,000. If the market is strong than the eventual price will not be close to your budget. It is sometimes possible to get a house well below asking price but this should not be your expectation. Try and determine what is most important to you in a house and that along with your budget will guide you in the right direction. Second, be honest with your real estate agent. A good agent will ask questions to try and understand what you want but sometimes buyers aren’t good communicators. I often tell clients to be honest and feel free to tell me when they hate something. If you are not honest about your opinions or your budget it will be hard for any realtor to help you. I once had a client tell me they wanted a house for less than $200,000 in a certain area of town. Well it was just not a very realistic price for the location and as it turned out they bought a house for $300,000 in the desired area. But we looked at a lot of bad stuff before they finally told me the truth. It turned out there max budget was well over $300,000, but they thought they may get a better deal if they told me $200,000. In the end, we got on the same page and it all turned out well. However, they made the process very hard because they weren’t honest. I have to give credit to my business partner, Jeb, for this last one. You have to understand that “patience is a virtue.”

In most cases wise decisions are not made quickly or hastily. If you lose out on a house or it takes a while to find what you are looking to find do not fret. In the end, things have a way of working out the way they should.

Buying or investing in real estate can be a lot of fun. That is why HGTV and A&E develop so much programming around real estate. On the other hand, it can be stressful and disappointing. However, you can avoid a lot of stress and frustration if you are realistic, honest, and patient. I guess those are three pretty good words to live by in general. I have to admit that I have a big problem being patient sometimes. In fact, if you ask anyone that knows me well they might say that I am a very impatient person. Regardless of my shortcomings, it is good advice so do as I say and not as I do.